Since the dawn of time… Well, since the dawn of commercial television and news media, the press have loved to hype the topic of interest rates. They don't emphasise the facts around interest rates rising. In my opinion, the market is simply resetting to get "back to normal" levels. Here are a few points to help you understand precisely how the future interest rate rises will affect you.

What are “normal” interest rates?

Interest rates dropping to historical lows of below 2% was always going to be short-lived. It's simply not sustainable long term. For rates to remain at these levels would have brought pandemonium to the Australian housing market, with prices already insanely inflated.

Over the past 20 years, the average interest rate in Australia has sat at 3.89%, and it's likely to return to those rates in the coming months. So be prepared for this when you are crunching your numbers. It's important to ensure that, first and foremost, you can comfortably afford your new or existing mortgage in the face of changing rates.

What does this mean for you?

Don't get sucked into the media hype when assessing your financial situation. They'll often choose the most extreme scenarios to grab your attention.

Let's run an example. Let's say that you have a $650,000 mortgage that you've secured over 30 years. If you were previously paying a 2.5% interest rate, and your rate increased by 2%, your repayments will increase by $725 per month.

That may seem like a lot. But this would be a very gradual climb to get to this point, and you can make smaller lifestyle adjustments to combat rising repayments. To break it down further, this works out to be $25 per day.

How to recover from a whopping 2% interest rate hike:

·      Become more economical with your shopping, purchase pantry staples in bulk and head to your local farmers market to buy your meat and produce; they are usually far cheaper than Woollies

·      Delete one or two of the 13 streaming accounts you've somehow acquired

·      Buy a coffee every second day, make one at home every other day

·      Invite friends over to your house and have everyone bring a plate to share, rather than spending a few hundred out at dinner

All of these little things will create small changes that can help counteract increased repayments coming out of your budget.

Working your bank for a better rate

The silver lining is that there are ways that you can combat rate rises to secure the best rate. Countless clients have achieved interest rate savings by using RateTracker to detect breaches as soon as they occur. It's a proactive system that enables clients to remain on the front foot, with most cases resulting in a 0.25% discount that would otherwise have been coming out of their pocket.

Rate rises aren't ideal, and they will affect most Australian homeowners. But tackling interest rate rises head-on is crucial to improving personal cash flow and safeguarding yourself in these uncertain times.

The biggest killer at play here is the rising cost of living. Make sure that you are constantly reviewing your outgoings; they are increasing faster than we know. We'll keep doing everything we can to keep you informed and help out along the way. We're all in the same boat and trying our best to stay ahead of the game.